Pakistan’s weight is likely to increase in the upcoming Morgan Stanley Capital International (MSCI) Quarterly Index Review (QIR), which is scheduled to be announced on August 12, 2024.
“Pakistan weight may increase by 35-45 basis points (bps),” said Topline Securities, a brokerage house, in a report on Thursday. “It may go to 4.7-4.8% from 4.2-4.3%,” Topline said, following the addition of a number of scrips and “increase in market capitalisation of existing constituents by ~9%.”
The brokerage said that due to expected increase in weight by ~35-45bps and assuming Assets under management (AUM) size of $5-10 billion tracking MSCI FM index, “we expect gross inflows of $20-45 million”.
The changes to MSCI Frontier Market index will be effective from September 02, 2024. To highlight, Pakistan was reclassified to MSCI Frontier Market from Emerging Market in September 2021 as it did not meet the standards for Size and Liquidity.
Meanwhile, the brokerage house, in its report citing details updated on the MSCI website in last review of May 2024, informed that the minimum threshold of free float and total market capitalisation for the selection of frontier market stocks was revised upward from $57 million to $63 million and $114 million to $126 million, respectively.
In the upcoming review this month, “we expect addition of DG Khan Cement (DGKC), Sazgar Engineering (SAZEW), Faysal Bank (FABL), and Fauji Fertilizer Bin Qasim (FFBL) as their free float and market both are above the threshold used for last review by 6-27%.
“There are also chances for the addition of Fauji Cement (FCCL). However, its free float is only 1.4% above the last review threshold,” the report said.
On the other hand, “TRG fails to meet total market cap requirement of $126 million as its market cap in last 10 working days has ranged between $105-117 million.
“However, with the help of buffer rule, this company may also remain part of index,” it said.